SURYAFOOD AND AGRO LTD: PRIYAGOLD

Strategies in the processed food market

By:
Pulkit D. Garg, F019
Rohit Ginoria, F022
Sakshi Goyal, F025
Siddharth Pandey, F039
Raina Shah, F050
Shrutkirti Vashist, F055
The processed food industry
Biscuit Industry Analysis

• 2nd biggest category under convenience food sector

of Food Processing Industry

• Industry share: 24%

• Current size: INR 12,805 crore

• CAGR of 8% in the next 3 years

• Cookies and cream biscuits cornering market share

from Glucose

• Per Capita Consumption in India – 2.0 kg, USA –

10.0 kg
Company brief
1993
Surya Food and Agro Ltd. set up to
manufacturing Biscuits
• Founder and Promoter – Ballabh Prasad Agarwal
Plants at Greater Noida, Surat and Lucknow
• Uses umbrella brand Priyagold for marketing and selling
purposes
• Tagline for Biscuits – Haq se Maango
• Major presence in rural and urban areas of Northern and 2006
Western India Surya Fresh Foods Ltd. Entry into Juices under
the brands Treat and Fresh Gold
• Market share in Biscuits – 12% , Juices – 3rd largest
Plant at Greater Noida
• Products supplied to Airlines, Hotels, Railways, Canteens
Stores Department (CSD) and organized retail outlets
• Vision – Great taste at affordable prices
2008
Surya Processed Food Pvt. Ltd. is a
diversification into Chocolates and Candies
Plant at Haridwar
Company portfolio
Priyagold
Products

Cakes and
Confectionary Juices and
Biscuits
Beverages • Fresh Gold
• Treat
• Fresh Fizzy
• Choco Cake • Cheez Bit
• Fruit Cake • Chatpata
• Snakker Jeera Tops
• Amorae • Chatpata
Cashews
• Minty
• Partner
• Eclairs Wafers
• Chocogold
Product Portfolio Biscuits

Premium Cream

Dark Butter- Coconut Cheese Kids Classic

Italiano Bourbon
Delight bite Crunch Cracker Cream Cream

Standard

Marie Don
Zigzag CNC
Light Glucose
Current strategies of the company
• Comparative Financial Position – Ratio Analysis
Metric Britannia Priyagold Parle G
Return on Equity 30.61% 5.12% 11.21%
Current Ratio 1.05 1.32 1.74
Debt/Equity 1.02 0.55 0.01
Inventory Turnover 14.69 40.27 12.23
Debtors Turnover 87.97 63.09 71.92

• Biscuits taxed at rates between 12.5% - 15% (VAT), whereas closest

comparable, Bread is taxed between 0%-4%
• High taxes and input costs in domestic markets, without rising prices
affecting margins
 IPO Way we go for an IPO?
Should Sales & Sales Growth Rate
IPO Rationale (Rs. in crores)
9.2%
61.6% 43.3% 15.2%
Declining Sales Growth Rate 12.9%
24.2% 474
5.1% -9.1% 434
196 334 377
The biscuit market in India is growing at a rate of 15% and the 281 295
269
same is expected to continue over the period while the juices
industry is growing at ~35%. Surya Foods has shown constant
decline in sales growth post 2008 even after entering the juices FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
segment and being the 3rd largest player in the same
Operational Efficiency
(Rs. in crores)
5.7%
5.0% 3.5%
Declining EBIT and PAT Margins 3.7% 4.1% 3.4%
3.1% 19.1
Surya Foods reported declining EBIT (Operating) margins and 2.2% 1.9% 16.36
15.37
14.81
PAT margins post 2008 while the industry reported EBIT margins 2.67 9.74 8.6 5.48 9.82
to the tune of 8.5%. The company also failed to report PAT
margins of over 0.5% in 2011 which suggests its low focus on FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
operational efficiencies
Working Capital Management
1.7 1.64 1.51 1.67
1.71 1.7
Inefficient Working Capital Management

Surya Foods has not been able to manage its Working

Capital vis-à-vis the industry as the difference has been 1.29 1.24 1.33 1.32
0.99 1.03
considerable over the years. This shows the working capital
inefficiency of Surya Foods. FY06 FY07 FY08 FY09 FY10 FY11
Company Industry
Source: CapitalLine
Competitive Strategies

• Market share- 10% (Biscuit category)

• Capacity utilization- 100%

• Technological know how- 20000 units inspection in 1 minute

at ITC
• control over suppliers and distributors PARLE – 38 %

• Surya Foods has integrated backward

BRITANNIA – 35 %
• Distribution:
• Distribution channel through Consignee sales agents &
super stockists throughout the country Priyagold – 10 %

• Coverage area: largely in the Northern & Central India

ITC – 10 %
• Diversified into manufacturing of fruit juices in 2009

OTHERS – 7%
Manufacturing strategy
• Operations:
Currently operating through 4 units across country

• Capacity:
Greater Noida
• Biscuits- 150,000 MT p.a.
• Chocolates: 20 tons of chocolates per day
• Fruit drinks -10,000lts of juice per hour Lucknow
• 2 units shut down due to increase in cost of production
Surat

• Strategy:
• Outsourced capacity to Hyderabad plant
Hyderabad
• Opened manufacturing plant in SIDCUL, Haridwar due to tax
benefits
• Backward Integration- Condensed milk and chocolate plant
used in their biscuit and cakes categories

“International Quality Crown Award, London 2004”

for best quality biscuit manufacturer
Marketing strategy
• Target Segment: Adults, Kids, Young adults, the health conscious
• Positioning: Positioned as products with great taste at affordable price
• Brand Ambassador: Karishma Kapoor, Lisa Haydon, Saif Ali Khan, Shilpa Shetty
• Media tools
• Company spends Rs 15 crore on advertising
• 50% of the budget allocated for Television and the rest on print and outdoors

Issues faces currently:

• Failure of “Khao aur Khelo campaign” major setback

• Lack of support from retailer chain network in promoting the campaign
• Public relations:
• Youtube says: Misleading advertisement from Priyagold (14450 views)
• Ad implies that “Freshgold juice is better than water after a physical workout”
• Strategy needed: Proper PR system in place to tackle any negative publicity on all media specially digital
Current product strategy

Magic Cakes
Juices

Confectionaries

• 200 railway stations

• Target: 500 food kiosks
for sale of ready-to-eat Italiano cookies
products
• Target achieved; 250
Kiosks
• Biscuits and Juices for Choco-filled cookies
in-house train
distribution
• Expected Turnover: 300
milllion INR
SPACE MATRIX
Recommendations
• The company should improve exports in order to avoid
high tax rates in India
THANK YOU